Facebook's (FB) Firm First Quarter Earnings

Last week, social media giant Facebook (FB) reported its first quarter earnings. Earnings were flat from the prior year quarter at $0.12 per share, missing the consensus estimate by a penny. Net income edged up 7% to $219 million. Revenue, however, surged 38% to $1.46 billion, easily topping the $1.44 billion that analysts had expected. That market had a fairly muted reaction to Facebook's results, but investors were fairly relieved that the company was staying profitable, growing its active user base and successfully monetizing mobile ads.

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Facebook finished the quarter with 1.11 billion monthly users, a slight increase from 1.1 billion last quarter, and its daily users rose from 618 million to 665 million. 30% of Facebook's total ad revenue, which came in at $1.25 billion, was generated by mobile ads, up from 23% a year ago. Last quarter, Facebook finished off fiscal 2012 with 680 million monthly mobile users, a 57% year-on-year increase. Analysts project this steep growth will continue throughout 2013. Many analysts are watching Facebook's proportion of daily to monthly active users, which came in at 58.5% last quarter. This quarter, that figure improved to 60%, which signals slightly higher use engagement. However, much of that growth was attributed to emerging markets, which have less spending power than developed countries such as the United States. That means that higher engagement does not necessarily guarantee higher ad revenues. However, Facebook's "app install ads," which allow game and app publishers to promote their products in a user's news feed, have proven popular in many markets. Average revenue per user rose 20% in the United States and 12% worldwide. Facebook's payments revenue came in at $213 million, up from $186 million in the previous year. This includes micro-transactions on the site and other customer payments. The company also recently introduced Parse, a mobile development platform marketed to developers. It operates on a tiered "freemium" pricing plan based on usage, with the cheapest paid version costing $199 monthly. Facebook notably increased its expenses and investment spending during the quarter by 56%. The company is rolling out its Android home screen launcher, Facebook Home, in a bid to dominate Google (GOOG) Android smartphones, which control nearly half of the U.S. market. Other products, such as Graph Search, continue to intrigue investors who have begun speculating what Facebook's real plans are for the future. Although Facebook trades at 36 times forward earnings, the company is steadily reconciling its P/E with its share price, which still remains 25% below its original IPO price. Facebook's primary competitors are Google and LinkedIn (LNKD). Google+ recently announced a surprising surge in active users to 359 million users, which means that despite its slow start, Google's social network could evolve into a threat against Facebook. Meanwhile, Twitter is also reportedly contemplating an IPO later this year. However, Facebook remains the dominant player in the field, and the stock will likely firm up as top and bottom line growth stabilize. Other News About FB Mobile Ads Help Propel Earnings at Facebook Facebook is surprisingly making mobile ads work. Facebook Q1 Earnings Beats With $1.46B In Revenue, Up 38% Facebook posts impressive revenue growth. Other Stocks in the News The Road Ahead for Domestic Big Tobacco Will big tobacco survive in the U.S.? Big Pharma's Kickback Conundrum Are kickbacks just the price of doing business'? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on May 7, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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